Engage Early with Capital Providers
Over the last ten years we have witnessed a significant number of large
iconic New Zealand businesses being sold to our Trans-Tasman neighbours,
in particular to private equity firms. Who are these private equity firms and
why do New Zealand business owners feel so compelled to sell their
business to these Australians? Surely it is not for the love of money alone?
In this month's article Cameron White talks to the directors of three Australian
private equity firms and finds out that Private Equity is still very much alive and well
and learns why New Zealand business owners should consider partnering with
them.
John Peacocke of Next Capital, Brendan Hill of Wolseley Private Equity and
Nick Mole of Arowana Capital have shared their thoughts on private equity
from the providers perspective, but what is private equity (PE)? It is typically
an investment by professional investors in private businesses, generally with
high profit growth potential, with the aim of building and improving them
over the medium term (4-5 years).
John Peacocke is a Kiwi himself and a Director of Next
Capital, a Sydney-based private equity firm targeting New
Zealand and Australian expansion capital and management
buyout investments in the range of $50m-$250m enterprise
value. John describes the frustrations of many SME business
owners as needing more access to equity capital and broader
skills to grow, restructure and/or pay down debt.
Further, John states that these frustrations are often coupled with a range of
shareholder or personal needs such as to realise a capital return, a path to liquidity
and succession planning issues. Business owners may not have the capacity to
fund more growth. Private equity fills a gap in the capital markets and has the
flexibility to match these business and personal needs.
Next Capital chooses investments by focusing foremost on management. John
says, "We look to back the right jockey (management) on the right horse (business
model) in the right race (sector)". The key factor is management, so if you have a
credible management team with high growth aspirations and willingness to partner
to drive an international success story, John believes you should consider private
equity. Next’s last fund of $265m is fully invested in seven businesses, including
three in New Zealand: Hirepool, Healtheries and Nutralife (the latter two now
merged into Vitaco). Next Capital’s door is certainly open for business – they are
currently looking to invest a further $285m which was raised in 2009. As a team,
past successes listed on the ASX include Repco, The Reject Shop, Invocare,
Neverfail and JB Hi-Fi.
Wolseley is an independent Australian private equity firm with
approximately $350 million in funds under management.
Director Brendan Hill states that "a significant portion of this
money will be invested over the next two years. We are
actively looking for opportunities". Wolseley's focus is on
Australian and New Zealand manufacturing, service and
distribution companies with enterprise values between $20
million and $150 million. Wolseley's investment strategy is
focused on growth. Wolseley pursue investment opportunities where their large
team can add value through their knowledge, skills and capabilities in co-operation
with the company's management team. Wolseley is typically a majority investor.
One of Wolseley's current investments is in partnership with a New Zealand based
business called Freshmax Pty Ltd, the largest privately owned fruit and produce
distributor in New Zealand. Since their involvement, Freshmax has acquired the
businesses of Holman Fresh, Panda Ranch and Oztaste in Australia.
Len Day
Managing Director
Len has over 20 years experience in
sales, most recently as Managing
Director of a successful real estate
sales agency.
Len prides himself on being able to
identify the motivations of various
parties to a transaction, with a view to
negotiating a mutually beneficial
agreement.
Len is responsible for ensuring that all
aspects of T1 comply with the highest
levels of client service, quality, and
ethics.
Contact Len
len.day@t1business.co.nz
D: 09 968 2227
C: 021 677 621
Cameron White
B.Com, Dip. Grad
Cameron has held roles in banking
with
two
large
Australasian
institutions.
He
has significant
experience in the funding and
evaluation of business acquisitions.
Cameron's focus is on business sales
with a value between $1m and $30m.
Contact Cameron
cameron.white@t1business.co.nz
D: 09 915 1302
C: 021 848 038
According to Brendan, there are many advantages to vendors from selling to
private equity. For example, a vendor may retain some form of ownership and
benefit from growth in the business or, alternatively, may complete a 100% exit
from the business efficiently and effectively, protecting the long term interests of
their employees and avoiding selling to a competitor.
Brendan stresses that Wolseley are active investors at a Board / strategy level but
not involved in the daily operation. Focusing for growth over a 4 to 6 year time
horizon, Wolseley typically exit via a public listing (IPO), a trade sale to a
corporate buyer or a sale to another, larger, private equity investor.
Dealing with smaller PE deals in the enterprise value range
of $3 million to $30 million, Arowana Capital is highly flexible
with deal structures. Nick Mole, Director, tells us that
Arowana "seeks to take meaningful stakes in businesses and
prefer that existing owners retain a shareholding, although
this is not always required".
One of Arowana's most successful investment stories is
SoftLaw Corporation, where the PE firm was instrumental in helping the company
from a strategic level right down to "hands-on" management, as required. During
the investment period, Arowana Capital bought three businesses, helped to grow
the business dramatically, and ran the sale process which culminated in the sale
of the company (then called RuleBurst/Haley) to Oracle at the end of 2008. The
investment generated a 15x return for the foundation shareholders.
Arowana is interested in New Zealand businesses simply because as Nick says
"there are good businesses in NZ!". They are looking for business with the potential
for sustainable and profitable growth, and where the team can get involved to help
the business to grow.
So the message is clear - quality New Zealand businesses are in high demand by
the Australians. PE firms can offer guidance from Board level down to operations
(depending on requirements), with a focus on quickly growing the business and
improving performance.
Apart from the rapid growth potential offered by PE firms, the release of capital is
certainly an attractive option for many business owners. This route may enable the
business owner to remain active in the business and yet also enjoy some of the
fruits of their labour without having to sell the whole company.
Before accepting investment from a PE firm you will need to check to what extent
they will assist from the strategic/operational perspective. Similarly, you should
have a clear understanding of the timeframes and anticipated exit strategy. "Fit" in
terms of personality, style, sector expertise, growth versus turnaround, strengths
and relevant track record are important factors to consider.
Should you wish to learn more about the benefits of selling part or all of your
business to a private equity firm, please feel free to contact Cameron White
directly. We have strong relationships with the majority of the Australian Private
Equity firms and are acutely aware of their respective investment criteria.
Current sale opportunities available are detailed below.
Please contact Cameron White on (09) 915 1302 to discuss.
Full Information Memorandums are available through confidentiality process.
Businesses for sale
Head Office
Operating
Earnings
(EBITD)
Price
Comments
Home Services
Regional Master
Franchise
Auckland
c$460k
$1.5m
The territory has over 10,000 clients through
its 90+ franchises. Secure and re-occurring
cashflow, capital growth, strong brand,
significant head franchisor support, no stock
and serious growth opportunities.
Should you be interested in selling all or part of your business, or if you have any questions, please do not hesitate to contact
us. Confidentiality is assured.
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